The NNPC Saga: Legal Perspectives

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This article by Learned Senior Advocate, Mike Ozekhome, is an in-depth analysis of the letter written by the Minister of State of Petroleum Resources and Chairman of the Board of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu to President Muhammadu Buhari, grumbling about the actions of the Group Managing Director of NNPC, Dr. Maikanti Baru. He examines the relevant laws, that is, the NNPC Act and the Public Procurement Act, and concludes that the actions of the GMD and President Buhari, are unconstitutional

 

Introduction

The Nigerian National Petroleum Corporation (NNPC), is the State owned oil company responsible for supervising, regulating and in collaboration with other oil companies and subsidiaries, participating in the exploration, production and sale of petroleum products, to generate revenue for the government. Due to its enormous powers and strategic mandate, the NNPC has been described as Nigeria’s cash cow.

 

The Troubling Letter

It is no news the brouhaha generated by the letter dated 30th August, 2017, written to President Muhammadu Buhari (PMB) by the Minister of State for Petroleum, Dr Ibe Kachikwu, over the contracts allegedly awarded by the Group Managing Director (GMD), NNPC, without the consent of Kachikwu, or approval of the NNPC Board, of which Kachikwu is the Chairman. Kachikwu in the said letter, expressed his heartfelt concern, on the need for due process and procedures to be followed by NNPC in awarding contracts.

He noted the long history of non-transparency of the NNPC Tenders Board, and the fact that, it cannot be the final authority for contracts clearance or approval. He listed five (5) specific instances. He bemoaned the idea of learning about contracts award through the media, rather than the “correct governance”, structure, which is that he, as the Minister of State and the Board must review transactions, and give their concurrence prior to presentation to PMB.

Kachikwu also decried the massive changes in recent postings within the NNPC (many Nigerians cried about its lopsidedness), by the GMD, Dr Maikanti Baru, who incidentally had succeeded Dr Kachikwu. He said the Board over which he presides, was never briefed, as was the Board Services Committee, whose function is to review potential appointments and terminations of senior staff prior to implementation. Kachikwu therefore, requested that PMB encourages transparent practices in NNPC, while the President restores sanity to a system that had so far, belittled and humiliated him.

 

NNPC/Baru Response

The Corporation, on Monday 9th October, 2017, in a statement signed by its Group General Manager, Public Affairs Division, Mr. Ndu Ughamadu, denied Kachikwu’s allegations, and noted that the “law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters”.

Ughamadu argued:

“There are therefore, situations where all that is required is the approval of the NNPC Tenders Board, while, in other cases, based on the threshold, the award must be submitted for presidential approval. Likewise, in some instances it is FEC approval that is required.”

Dr Baru, however, agreed, as widely reported by several media outlets, that two separate oil contracts worth $1 billion and $780 million, were approved by PMB on July 10 and July 31 respectively, during the time that he was receiving medical treatment in London.

 

Nagging Questions

What does the law say on the above issues which have in the past few days, sent ripples across the Nigerian polity? Does PMB, after relinquishing power to the Vice President upon going abroad for medical treatment in London, still retain the powers of the President as contained in the Constitution? Has PMB, while on sick leave, the capacity to execute contracts of this nature?

 

Legal Analysis

The contracting process in NNPC is governed by the following laws:

  1. The NNPC Act CAP 320 LFN, 1990.
  2. The Public Procurement Act, 2015.

Section 1 (2) NNPC Act provides:

“The affairs of the Corporation shall, subject to Part II of this Act, be conducted by a Board of Directors of the Corporation which shall consist of a Chairman and the following other members, that is-

(a) the Director-General, Federal Ministry of Finance and Economic Development;

(b) the Managing Director of the Corporation; and

(c) three persons to be appointed by the National Council of Ministers, being persons who by reason of their ability, experience or specialised knowledge of the oil industry or of business or professional attainments are capable of making useful contributions to the work of the Corporation.

(3) The Chairman shall be a Minister in the Government of 1979 No. 44 the Federation to be known and styled as the Minister of Petroleum Resources.”

Section 3 (1)

“There shall be appointed by the National Council of Ministers, a Managing Director of the Corporation who shall be the Chief Executive Officer of the Corporation and shall, subject to Part II of this Act, be responsible for the execution of the policy of the Corporation and the day-to-day running of the Corporation’s activities and its associated services.”

Section 6 (1): “The Corporation shall have powers to do anything which in its opinion is calculated to facilitate the carrying out of its duties under this Act including, without limiting the generality of the following, the power –

(c) to enter into contracts or partnerships with any company, firm or person which in the opinion of the Corporation will facilitate the discharge of the said duties under this Act”.

Section 1 (2) of the NNPC Act, states that the affairs of the Corporation shall be conducted by the Board of Directors of the Corporation, of which Dr Kachikwu is the Chairman. The affairs of the company here, obviously include the provisions of section 6 (1) (c) NNPC Act, which allow the Corporation to enter into contracts or partnerships with any company. Section 3 (1) which describes the GMD as the CEO of the Corporation, does not in any way contradict the provisions of section 1 (2). The designation of Kachikwu as the Minister of State for Petroleum Resources is a mere nomenclature, which does not rob him of any powers enshrined in the Act. Kachikwu, to all intent and purport, is the substantive Chairman of the Board and Minister of Petroleum Resources. The NNPC Act does not recognise the term “Minister of State”. Contracts which fall within the threshold of the Board cannot pass approval stage without the consent of the Chairman. Kachikwu therefore, cannot be sidelined. The approval of NNPC contracts solely by Baru or the Tenders Board, is consequently, illegal, as it is in complete violation of the Act. One cannot find justification in any law, not even in Public Procurement Act.

Section 21 (1) of the PPA, 2015, provides:

“Subject to subsection (2), the Head of a procuring entity shall establish a procurement committee to review procurement proceedings for that procuring entity and such other committees for other aspects of the procurement process. “

Subsection (2)

“The operations of procurement committees established under subsection (1) shall be managed by procuring entities in accordance with the administrative guidance issued by the Office under section 7(l) (c).”

Section 22 PPA, provides: “The functions of a procurement committee shall be to-

(a) review and make recommendations to the head of the procuring entity with respect to the award of procurement 19 contracts that the head of the procuring entity requires the procurement committee to review;

(b) review evaluation reports on bids with respect to the award of procurement contracts referred to in paragraph (a); and to maintain proper records.

It is crystal clear that the provisions of PPA on this issue only apply to procurement processes and proceedings. It does not deal with substantive approval. Every procuring entity must first decide on whether to award certain contracts, before procurement committees are constituted by the Head of the organisation (GMD), to see that the procurement and bidding procedures are followed. The power of the GMD to constitute the procurement committee cannot circumvent the powers of the Board. In fact, section 21 (2) PPA, gives the Board the mandate to control and manage the operations of the procurement committees constituted by the GMD. It is therefore, wrong to sideline the Board and go directly to the President for approval of contracts. Every contract has value. Once a contract’s value surpasses the powers of the Minister, then it goes to FEC. In every organisation, be it government, banks, or private enterprises, the creation of management boards for their day-to-day operations are all too known. The GMD therefore, lacks the power to diminish the roles of the Board of NNPC.

By virtue of section 1 (2) of NNPC Act, it is clear that the NNPC Board has overall supervisory powers. How can these supervisory powers not include some form of oversight on contracts worth billions of dollars? Haba!

Even if there was no such provision as section 1(2) of the NNPC Act, is it not commonsensical in sync with transparency, that the Board should have a say in the affairs of the Corporation?

I do not know of any standards of transparency and due process, that will allow NNPC to award contracts of that magnitude without carrying the Board of the Corporation along. Due process is not just about the letter of the law. It is about the spirit of the law. As they say, transparency is the best deodorant.

 

PMB’S Presidential Powers in Abeyance

I submit respectfully that, any letter, bill, approval or acts executed by PMB, in his capacity as the President of Nigeria, during his sick leave abroad, having relinquished powers to the VP, are

unconstitutional.

On May 9, 2017, PMB had written to the         President of the Senate and the Speaker of the House of Representatives, notifying them that he had relinquished presidential powers in accordance with the Constitution, which declaration was duly received and was read on the floor of both chambers. PMB spent 103 days, receiving treatment in London, returning only on August 19. On August 21, the President notified the National Assembly of his return in writing, saying he had “resumed” his “functions as the President of the Federal Republic of Nigeria with effect from Monday, 21st August, 2017.” The effect of the letter of 9th May, 2017, is that all the powers of PMB as the President of Nigeria automatically ceased and inured in the VP. PMB could not therefore, have executed any contract, bill, or any acts whatsoever without first notifying the National Assembly in writing of his resumption of duties as the President of the Federal Republic of Nigeria. The contracts allegedly approved

by PMB on July 10 and July 31 respectively, during the time he was receiving medical treatment in London, are therefore, unconstitutional and invalid. PMB lacked legal capacity to do so, as he had ceded same to the Vice President. Consequently, any approval he made was as Alhaji Buhari, not as President Buhari, as powers no longer vested in him. No car can be driven by two drivers at the same time; one driver at a time, is the rule of driving.

 

PMB Was Incapacitated

Furthermore, PMB at the time the said contracts were approved, was ill and lacked the capacity to approve same. A contract for such huge sums, cannot just be approved and signed at face value. Experts needed to study them, then advice the President before approval and signature. How could an ailing President who was fighting for his life, be signing contracts worth billions? Why did the GMD not give the Acting President the contract papers to approve or disapprove?

Why did he have to fly to London to have them approved and signed by a President who had ceded his powers?

These questions are best answered by PMB and the GMD.

The provisions of NNPC Act, are clear and unambiguous as they relate to the affairs of the Corporation. Only Sections 8 (1) & (4) of the Act specifically require that all NNPC borrowings must be approved by Mr. President where they involve overdraft, borrowing in currency other than Naira and is to be borrowed by the Corporation “otherwise than temporarily”.

 

My Humble Advice to PMB

I implore PMB, to cause intensive investigations to be carried out in this matter. PMB must not only be said to be fighting corruption, but must, as a matter of fact, be seen to be fighting corruption.

Chief Mike A.A. Ozekhome, SAN, OFR, FCIArb, LL.D, Constitutional Lawyer and Human Rights Activist